2018 FIFA World Cup in Russia – Does It Impact the Real Estate of the Country?
International sporting events are usually an economic boon to the host municipality. People rent accommodations and transportation, purchase concessions and souvenirs. They interact with the daily economy in a generally positive way. These short term economic boosts can move into longer-term trends in real estate. Only if the country has the proper political and financial infrastructure to support such a move.
June 14, 2018 at Luzhniki Stadium in Moscow marks the beginning of this year’s World Cup. According to reports from the Russian Central Bank, Russian real estate is set for a spike after the competition in. The bank emailed comments to Reuters saying that WC preparations had already helped to reverse the trends of stagnation from the previous two years. The bank stated that the Russian economy had already garnered a great deal of support and returned to gross. This is before the first centerfield face-off had ever occurred.
Russia expects to see job growth and increased demand for a variety of consumer services and products. This is where Russian real estate can begin to flourish. When people get jobs, they buy houses, and the majority of consumer products that people purchase over the long term our household items.
In terms of exact numbers, the Gaidar Institute of Russia expects that the World Cup will bring about 0.2% additional gross domestic product in the second and third quarters of the year. The Russian Central Bank countered that this would also increase consumer prices quite substantially in the same time frame. This ended up leading to a short-term spike in inflation. However, even this is good news. Profits for those companies turn into jobs, which turn into new homes for those new employees.
Putin has already put into place measures that will control the negative aspects of unbridled inflation. Russian authorities have already publicly denounced many hotel chains, caught raising the prices of their rooms over 18,000% for the World Cup. As a result, Russian financial experts believe that the inflation experienced will not actually hit the 2018 target of 4%. As a matter of fact, inflation may actually fall to a 2% rate in the second quarter of 2018. If this happens, it would be a record low.
The Numbers behind the World Cup
Russia has constructed 108 new sports facilities to house the World Cup. 96 training sites have also been erected, with a capacity of 16,000 people. These training sites will serve as entertainment and afterschool centers for children after the World Cup. Overall, there has been around 600 billion rubles of investments in infrastructure.
27 new hotels were built along with 26 transport infrastructure facilities. 13 hospitals were updated along with 12 power stations and 29 utility facilities. All of this construction created around 13,000 jobs in the construction industry alone. Overall, World Cup supports 100,000 jobs.
The investment that is coming from the international community is also quite substantial. From the 3 million in-house spectators, is expected to have around 1 million international guests. Host cities in the World Cup will experience around a 71% increase in tourist services, and there will be a 57% increase in the domestic tourists who are looking to park themselves in host city hotels.
In short, money is definitely moving in Russia.
If the 2014 World Cup in Brazil is any indication, there is a great deal of proof that Russian real estate will flourish after the events. Brazil, even with its Second World infrastructure, has enjoyed economic expansion for four years after it hosted the World Cup, with a gigantic boost of 7.5% GDP in 2010. Prices per square foot for apartments in Kaliningrad ($95.28/sq. ft.), Moscow ($480.17/sq. ft.) and Volgograd ($86.73/sq. ft.) have risen anywhere from 5% to 10% within the last quarter. This is true of all 11 cities in which new stadiums were constructed.
Reports are conflicting about the overall effect of the World Cup in Brazil on real estate. The positive aspects slightly outweighed the negative. Most of the gains were seen in the higher end of the market – away from first time home buyers and smaller condos. Russia expects much of the same, although there is no indication that the market’s lower end will suffer necessarily.
By all accounts, Putin is expecting to use the opportunity of the World Cup to showcase Russia as a global superpower. This will only help to bring in more investors from around the world – investors who have been looking to move money into emerging economies for quite a long time. Economies such as the aforementioned Brazil, India and Europe have become saturated. Much of the money from the Western world is now looking to Eastern Europe and Russia.